Question 1

A decrease in the money supply causes the interest rate to rise so that investment rises.

Accepted Answer

A) True 
 B)False

Question 2

In which situation would the long-run aggregate-supply curve shift right?

Accepted Answer

A)   if a hurricane destroyed several factories
B)   if the corporate tax rates decrease
C)   if new oil deposits are discovered
D)   if the money supply increasesE) All of the above
F) B) and C)

Question 3

Use the sticky-wage theory to explain why an increase in the expected price level shifts the aggregate-supply curve.

Accepted Answer

When people expect the price l...

Question 4

In which situation does investment spending increase?

Accepted Answer

A)   when the price level rises, causing interest rates to rise
B)   when the price level rises, causing interest rates to fall
C)   when the price level falls, causing interest rates to rise
D)   when the price level falls, causing interest rates to fallE) A) and D)
F) None of the above

Question 5

In which situation would the long-run aggregate-supply curve shift right?

Accepted Answer

A)   if the minimum wage increases
B)   if the capital stock decreases
C)   if interest rates increase
D)   if technology advancesE) B) and C)
F) A) and D)

Question 6

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?

Accepted Answer

A)   Investment is a small part of real GDP, and it accounts for a small share of the fluctuation in real GDP.
B)   Investment is a small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.
C)   Investment is a large part of real GDP, and it accounts for a large share of the fluctuation in real GDP.
D)   Investment is a large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.E) C) and D)
F) B) and D)

Question 7

Which part of real GDP fluctuate most over the course of the business cycle?

Accepted Answer

A)   consumption
B)   government expenditures
C)   investment
D)   net exportsE) A) and D)
F) B) and C)

Question 8

Figure 14-1 
-Refer to Figure 14-1. How would an adverse shift in aggregate supply move the economy?

Accepted Answer

A)   from A to B
B)   from C to D
C)   from B to A
D)   from D to CE) A) and B)
F) None of the above

Question 9

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

Accepted Answer

A)   1979
B)   1982
C)   1991
D)   2008E) B) and C)
F) None of the above

Question 10

Suppose the economy is in long-run equilibrium. Premier Aviary succeeds in getting a major new highway project for his province. At the same time, Premier Green succeeds in getting major new restrictions on logging enacted for her province. In the short run, what would we expect to happen?

Accepted Answer

A)   Real GDP will rise, and the price level might rise, fall, or stay the same.
B)   Real GDP will fall, and the price level might rise, fall, or stay the same.
C)   The price level will rise, and real GDP might rise, fall, or stay the same.
D)   The price level will fall, and real GDP might rise, fall, or stay the same.E) B) and D)
F) A) and B)

Question 11

Which of the following is NOT an explanation for the instability of oil prices?

Accepted Answer

A)   technological advances that have made it profitable to develop oil
B)   fluctuations in the rate of growth in major economies
C)   barriers to ship oil to overseas markets
D)   environmental groups' desire to maintain current levels of carbon emissionsE) B) and C)
F) B) and D)

Question 12

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, what would we expect to happen?

Accepted Answer

A)   The price level will rise, and real GDP will fall.
B)   The price level will fall, and real GDP will rise.
C)   The price level and real GDP will both stay the same.
D)   The price level and real GDP will both fall.E) A) and B)
F) B) and D)

Question 13

What are the effects of a decrease in the price level?

Accepted Answer

A)   The real interest rate increases, the dollar appreciates, and net exports increase.
B)   The real interest rate increases, the dollar depreciates, and net exports decrease.
C)   The real interest rate decreases, the dollar depreciates, and net exports increase.
D)   The real interest rate decreases, the dollar appreciates, and net exports decrease.E) A) and B)
F) A) and C)

Question 14

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage. In the short run, what would we expect to happen?

Accepted Answer

A)   the price level to rise, and real GDP to fall
B)   the price level to fall, and real GDP to remain unchanged
C)   the price level to remain unchanged, and real GDP to fall
D)   the price level to fall, and the real GDP to rise the sameE) All of the above
F) None of the above

Question 15

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 16

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the stock market combined with a significant number of skilled workers retiring, what would we expect to happen in the short run?

Accepted Answer

A)   Real GDP will rise, and the price level might rise, fall, or stay the same.
B)   Real GDP will fall, and the price level might rise, fall, or stay the same.
C)   The price level will rise, and real GDP might rise, fall, or stay the same.
D)   The price level will fall, and real GDP might rise, fall, or stay the same.E) A) and C)
F) B) and C)

Question 17

What is included in the aggregate demand for goods and services?

Accepted Answer

A)   labour
B)   technology
C)   net exports
D)   government bondsE) C) and D)
F) All of the above

Question 18

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded increase?

Accepted Answer

A)   when real wealth falls
B)   when the interest rate rises
C)   when the dollar depreciates
D)   when stock prices decreaseE) B) and C)
F) None of the above

Question 19

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Accepted Answer

A)   The expected price level rises, shifting aggregate demand right.
B)   The expected price level rises, shifting aggregate demand left.
C)   The expected price level falls, shifting aggregate supply right.
D)   The expected price level falls, shifting aggregate supply left.E) A) and D)
F) A) and B)

Question 20

What happens to prices and output when the long-run aggregate-supply curve shifts right?

Accepted Answer

A)   Prices and output both increase.
B)   Prices and output both decrease.
C)   Prices increase and output decreases.
D)   Prices decrease and output increases.E) None of the above
F) B) and C)

Exam 14: Aggregate Demand and Aggregate Supply

A decrease in the money supply causes the interest rate to rise so that investment rises.

Correct AnswerverifiedShow Answer

Figure 14-1 -Refer to Figure 14-1. How would an adverse shift in aggregate supply move the economy?

Correct AnswerverifiedShow Answer

In which situation does investment spending increase?

Correct AnswerverifiedShow Answer

Which part of real GDP fluctuate most over the course of the business cycle?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the stock market combined with a significant number of skilled workers retiring, what would we expect to happen in the short run?

Correct AnswerverifiedShow Answer

In which situation would the long-run aggregate-supply curve shift right?

Correct AnswerverifiedShow Answer

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

Correct AnswerverifiedShow Answer

In which situation would the long-run aggregate-supply curve shift right?

Correct AnswerverifiedShow Answer

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Correct AnswerverifiedShow Answer

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, what would we expect to happen?

Correct AnswerverifiedShow Answer

What are the effects of a decrease in the price level?

Correct AnswerverifiedShow Answer

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded increase?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage. In the short run, what would we expect to happen?

Correct AnswerverifiedShow Answer

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium. Premier Aviary succeeds in getting a major new highway project for his province. At the same time, Premier Green succeeds in getting major new restrictions on logging enacted for her province. In the short run, what would we expect to happen?

Correct AnswerverifiedShow Answer

What is included in the aggregate demand for goods and services?

Correct AnswerverifiedShow Answer

What happens to prices and output when the long-run aggregate-supply curve shifts right?

Correct AnswerverifiedShow Answer

Which of the following is NOT an explanation for the instability of oil prices?

Correct AnswerverifiedShow Answer

Use the sticky-wage theory to explain why an increase in the expected price level shifts the aggregate-supply curve.

Correct AnswerverifiedWhen people expect the price l...View AnswerShow Answer

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When people expect the price l...
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